According to Erica, she sold the violin to a buyer in Canada, who disputed the label. PayPal declared the violin "counterfeit" (which Erica says there's no such thing in the violin world), and told the buyer to destroy the violin if he wanted his money back.

That's what the buyer did, and he took a picture. Why couldn't he just return it? Here's part of PayPal's dispute policy:

"PayPal may require you to ship the item back to the seller - or to PayPal - or to a third party at your expense, and to provide proof of delivery. Please take reasonable precautions in re-packing the item to reduce the risk of damage to the item during transit. PayPal may also require you to destroy the item and to provide evidence of its destruction."

And so, now the seller is out $2,500 and an antique violin. She says that when she spoke to PayPal reps over the phone, they "defended their action and gave [her] the party line."

She also says that the violin was "examined and authenticated by a top luthier prior to its sale," and that, "in the violin market, labels often mean little and there is often disagreement over them. Some of the most expensive violins in the world have disputed labels, but they are works of art nonetheless."

Nobody should be stuck paying for an item that isn't the real deal, but the primary problem with this whole episode lies in how PayPal somehow determined, without even looking at the item or knowing anything about that type of item, that it was counterfeit. Then, to take it further by making the buyer destroy it without further verification? Disaster.

Auction sites like eBay have always struggled with disputes -- it's just in the nature of the business. But it's the handling of the disputes, along with the sheer quantity of customer service complaints, that have helped earn the PayPal brand such a notorious reputation. Tales like Erica's aren't helping that image much.

UPDATE: PayPal sent us its official statement on this issue:

“While we cannot talk about this particular case due to PayPal's privacy policy, we carefully review each case, and in general we may ask a buyer to destroy counterfeit goods if they supply signed evidence from a knowledgeable third party that the goods are indeed counterfeit. The reason why we reserve the option to ask the buyer to destroy the goods is that in many countries, including the US, it is a criminal offense to mail counterfeit goods back to a seller.”